Thursday, August 25, 2011

The resignation of Apple Inc CEO Steve Jobs opens the door for rivals Samsung Electronics and HTC to battle for smartphone supremacy in salesrooms and courtrooms globally.

Jobs passed the reins to his right-hand man Tim Cook on Wednesday, saying he could no longer fulfill his duties.

Taiwanese group HTC, led by another well-known industry figure Peter Chou, is seen by many as the most direct competitor to Apple. It has seen sales surge in the last few quarters and has a reputation for innovative flair.

Samsung's fortunes are most tied to Apple, both as a competitor and supplier of components. The group also has a scale and an ability to react quickly that is rare in the sector.

Samsung's Galaxy range of smartphones and tablet computers running on Google's Android operating system are seen as the key competitor to Apple's iPhone and iPad, products which have changed the industry.

"Even before Steve Jobs' (resignation), Samsung was getting more and more optimistic that they can actually take on Apple in the smartphone arena," said Mark Newman, a former director of strategy at Samsung, where he worked for six years.

"The game is really now Samsung's to lose ... They are picking up market share because of the change in dynamics in the smartphone industry," added Newman, now a senior analyst for global memory and consumer electronics at Sanford C Bernstein.

BOOMING MARKET
Samsung this week unveiled four new cheaper smartphones targeting fast-growing emerging markets -- again setting it on a collision course with Apple, which sources say is readying a cheaper, 8 gigabyte iPhone.

Hong Won-pyo, executive vice president of Samsung's mobile division, told his team this week he was confident Samsung could soon overtake Apple in the smartphone market soon, according to a person at the meeting. Hong was speaking just hours before Jobs made his announcement to quit.

Apple and Samsung now scrap for top spot in the smartphone market, having overtaken the market leader for the past decade, Finland's Nokia, in the second quarter. Samsung's smartphone sales soared more than 500 percent in the second quarter, easily eclipsing Apple's 142 percent growth, though Apple sold about 1 million more phones. Nokia sales fell 30 percent.

"Investors were concerned that Apple would encroach into Android's turf, but Jobs' exit offers opportunities for Samsung to expand its smartphone market share at a time when Nokia is struggling," said Jeon Nam-joong, a fund manager at Consus Asset Management, which owns shares in Samsung.

Samsung has already stormed past its Asian rivals. Its market value of around $110 billion is comfortably more than Sony, Toshiba and Panasonic combined -- though still only a third of Apple's size.
Both Samsung and Apple will face increasingly stiff competition from new rivals in China and Taiwan, however.

Taiwanese group HTC -- is seen by many as the only phone maker able to innovate like Apple and has quickly risen to become the fifth largest smartphone vendor globally -- could benefit the most in this arena from any erosion of Apple's dominance.
"HTC may fare better than Samsung, which is currently languishing with legal hassles regarding alleged patent infringement and injunctions in Europe," analyst Richard Windsor said in a research note.
LEGAL BATTLES

Samsung's strength has been in being fast and cheap to the market with everything from TVs to chips and phones. That has created tension with Apple, which has complained Samsung's Galaxy range copies its iPads and iPhones.

Samsung and Apple, along with many of the other players in the fast-growing mobile devices market, are now engaged in costly and acrimonious patent and copyright battles.

Just on Wednesday, Apple won a preliminary injunction in a Dutch court stopping Samsung from marketing three smartphone models in some European countries.

"It's difficult to gauge precisely what the impact will be as our relationship with Apple is very complicated and intertwined with so many parts of our business," said a senior executive at Samsung's general management division.

Bernstein's Newman agreed.
"It's a very complex relationship and I think that it's very important to note that not only are they competitors, fierce rivals in the market place, but they need each other. I would say that Apple needs Samsung more than Samsung needs Apple."

The South Korean conglomerate supplied Apple with about $5.7 billion in components last year, some 4 percent of its total sales, and the portion grew to 5.8 percent in the first-quarter, driven by booming iPad and iPhone sales, which Samsung supplies chips for.

Samsung may also move more aggressively in closing the gap in software, one of its weakest links. Samsung Chairman Lee Kun-hee recently asked the firm's top managers to come up with various measures including M&A to raise its software prowess, according to South Korean media.

Lee, Korea's wealthiest man, is the second generation to run the sprawling Samsung empire which dominates the Korean corporate landscape. Like Jobs, Lee is seen as something of a visionary with an obsession for perfection. He once had a pile of substandard mobile phones piled up and burned in front of his employees to improve quality.More...